Year: 2000

Richard Ziglar: “USA Today had an article on ways to become a millionaire. It gave different odds on one’s success depending on the method. They gave the same chance for winning a million in a lottery as inheriting a million — twelve million to one. The best odds they gave were through owning a small business — a thousand to one. What struck me as odd were the chances of saving a million at $800/month for 30 years at 7.1% interest — one million to one. Surely this can’t be right. I have to admit $800/month would be impossible for me right now. Still those odds seem depressingly steep. Perhaps my sampling is skewed but I seem to know a lot of professionals who should be able to pull this off if they really wanted too. Unfortunately the paper did not go into why this would be the case. So what are the real odds of attaining a modicum of financial independence just through saving? (A million ain’t what is used to be so I’m not sure if that goal is very meaningful anymore.)”

I didn’t see the article, but from what you say, it certainly appears screwy. Why would the odds of inheriting $1 million be 12 million to one? That would suggest that only 23 Americans inherited $1 million this year.

And, yes, saving $800 a month for 30 years (and seven months) at 7.1% will absolutely make you a million — if you can do it after tax, and if you actually do it. (It will take you 37 years if you can only earn 5% after tax.)

The “real” odds of attaining a modicum of financial independence just through saving are excellent. But you really have to save.

Say you put $2,000 a year into a Roth IRA via a couple of index funds starting at age 25 and keep doing it until you’re 70. If the funds compound at 9% a year, you’ve accumulated an extra $1 million and change after tax to supplement your Social Security.

Of course, there’s inflation. No way is the stock market likely to beat inflation by 9% a year. But 6% is possible, if still somewhat optimistic. At 6%, the Roth IRA would grow to $425,000. Show me a 70-year-old who wouldn’t appreciate a $425,000 nest egg to help her or him through the next 30 years.

And that’s just $2,000 a year.

John Stockman: “I was intrigued by your description of I-Bonds, but when I contacted Schwab and Ameritrade they advised that I could not purchase them in their IRA or 401K as they were ‘Bank Products.'”

Right. Savings Bonds are not “bonds” in the traditional sense. You don’t buy and sell them in the open market, you buy them from a bank (or, now, with a credit card from the Treasury). Ask your broker to buy you TIPS — Treasury Inflation-Protected Securities. For more on the difference between I-Bonds and TIPS, click here. For everything you’d want to know about Savings Bonds, go to SavingsBonds.gov.

Russell Turpin: “Stock market and real estate prices make me swoon. But CDs are a lousy investment for a young man. (Well, OK, almost middle-aged guy.) What about convertible bonds? (Background: This question pertains to assets outside my retirement accounts, 95% of which are in equity mutual funds. I figure this is appropriate, almost regardless of my own personal view of the current market, given that their use is twenty years away.)”

Convertibles have the safety of bonds and at least some of the potential appreciation of stocks. Of course, you and I are not the first to notice this, and so they are priced accordingly. The interest you earn is pretty modest unless the risk is high and/or the conversion price way above the current stock price.

And because you are seeking an investment for your taxable account, both CD’s and convertible bonds are kind of rotten, because a good chunk of the interest would wind up going to Uncle Sam, not Cousin Russell.

If I were you, I would consider a steady program of periodic investments in a couple of index funds. Or, if you have a taste for it, the acquisition of a portfolio of your own, geared toward long-term, tax-deferred capital gains. Being one to go from the sublime to the ridiculous, I might include some Microsoft (MSFT), some McKesson (MCK), some Canada Southern Petroleum (CSPLF), some Criimi Mae (CMM), a little Calton (CN), and — from the ridiculous to the preposterous — 100 shares of Borealis (BOREF). And just wait five years and see where they are. If they’re much lower, you’ll hate me, but have the satisfaction of knowing that I lost even more than you did. If they’re much higher, you will have long since forgotten who suggested them. (Do not “pay up” for these stocks. They are currently selling for around $71, $25, $6.50, $1.56, $4.50 and $3.50, respectively.)

A couple of weeks ago I knocked George Bush’s acceptance speech and got e-mails like these:

Kevin Clark: “I came back from vacation and among the alleged Andrew Tobias columns in my e-mail (yeah Quickbrowse!) was one clearly not written by the fair and balanced author I’ve been reading for years. It was the shrill hysterical one about George W.’s speech.”

Joe: “You are a journalist. If you’ve changed professions, then note that on AndrewTobias.com. You can’t possibly agree with everything the Democrats do. You are in way too deep to realize how you sound. Trust me on this one. You will gain more supporters if you admit that there are positions you don’t agree with.”

I’ve been promising you a response ever since. Here it is (finally).

The first thing to say, of course, although I don’t say it with every column I write (mainly because I assume you are all sick to death of hearing it) is that I am – full disclosure — treasurer of the Democratic National Committee. Although none of my comments in this space is “official” in any way, I assume most of you know my leanings.

But I would never consciously write something I didn’t believe. Trust me: the pay as treasurer ain’t that good.

I believe this is a hugely important election, with stark, stark differences between the two parties on many key issues – what must Ralph Nader be smoking not to see this? – and on virtually all of them, I actually do agree with the Democrats, especially the Democratic leadership. And I actually do find the Republican leadership to be off the right edge of the spectrum.

I also believe Al Gore is far better qualified to be President than George W. Bush. (Bush senior was impressively qualified — a war hero, successful businessman, ambassador to China, ambassador to the UN, long-time Congressman, head of the CIA, two terms as Vice President. But junior?)

One point of disagreement I’d likely have with the Democrats, if it were an issue in the campaign, is auto insurance reform — a subject on which I have bored many of you to tears. Given strong backing from the trial bar, Democrats tread very lightly in areas of tort reform. But even on auto insurance reform, at least a good chunk of the Party – namely, the chunk that identifies with the Democratic Leadership Council that Al Gore, Bill Clinton and Joe Lieberman helped found – leans toward what I view as the correct side of the issue. The DLC endorsed the auto insurance reform we put on the California ballot four years ago.

On the other broad issues, even if it makes me seem less credible, I’ve got to admit I really do lean the way the Democratic Party leans. Consider:

Tobacco: Democrats lean toward the side of the health advocates, Republicans lean toward protecting the tobacco industry. You might actually say that under Clinton/Gore, all hell broke loose for the tobacco industry, for the first time, and that the tide finally turned. No sane person wants prohibition. But neither, in my view, is it sane to spend $5 billion a year promoting a highly addictive carcinogen that is the leading cause of preventable death.

Choice: The Democrats’ platform is solidly pro-choice; the Republicans’ platform solidly anti-choice. I can only begin to imagine the agony a woman has to go through in dealing with an unwanted pregnancy. Having the government get into the act, and going back to the days of coat hangers and back-alley abortions cannot be the solution. (My own hope is that one day people will look closely at the solution the late Carl Sagan and his wife Ann Druryan suggested in PARADE several years ago. In brief, it noted that the point at which human life becomes unique is the point at which there are human brave waves — around the sixth month. After that, they argued, abortion should be reserved for the most extraordinary circumstances. But before that, a woman should have an unrestricted right to choose.)

Minimum Wage: The Democrats managed to raise it from $4.25 to $5.15 an hour, over Republican opposition, and we hope to raise it again. Obviously, there are limits on how high it can prudently go. But I believe modest increases are both good social policy and good economic policy. (One is reminded of Henry Ford, wanting to pay his workers enough so they could afford to buy the cars they were making.) George W. Bush believes this issue should be left to the states. In his own state, the minimum wage (for jobs exempt from federal minimum wage) is $3.35 an hour. I know George W. thinks of himself as deeply compassionate, but I wonder how anyone can live on $3.35 an hour — $6,700 a year — or why he would not want to see them paid more.

Earned Income Credit: Democrats pushed for this; Republicans generally opposed it. Yay, Democrats.

Family and Medical Leave Act: Democrats pushed for this; Republicans generally opposed it. Yay, Democrats.

Guns: Democrats favor what I consider mild, sensible measures, like child safety locks, closing the gun-show loophole, and licensing handguns as we do automobiles. While Democrats have been pushing such notions, George W. has resisted them and signed a law to ease restrictions on bringing guns into Church.

The Environment: The Republicans basically scoff at Al Gore for having written Earth in the Balance. But I believe the delicate balance of nature can be affected by what 6 billion humans do, that the there is a hole in the ozone layer, and that a lot of attention should be focused on such things. I love the fact that our air and water are cleaner than they were.

Taxes: Bush has proposed a massive tax cut aimed primarily at those, like me, who need it least. It’s terrible economic policy — a booming economy is exactly when not to add massive stimulus — and it’s unfair. Even John McCain, a conservative Republican, said Bush’s plan is weighted too heavily toward the rich. Gore proposes more modest tax cuts, aimed mainly at the middle.

The Surplus: Bush would direct much of it to lowered taxes for the rich. Gore would direct much of it, instead, to paying down the public debt. This helps to keep interest rates low, which helps to keep mortgage and car loan rates low (not an issue for the rich); it cuts the cost of carrying our debt; it keeps our prosperity going; it puts us in a stronger position to meet future challenges.

Campaign Finance Reform: We badly need it and will never get it under a Republican administration. Al Gore has said that the McCain-Feingold bill will be the first piece of legislation he submits to Congress. (It was killed last time by a Republican Senate.) McCain-Feingold won’t solve all problems, but it’s a start.

Diversity: Clinton/Gore have done a vastly better job of tapping the talents of all communities than Reagan/Bush ever did. And this does two great things. First, it makes for a more talented administration. (It just doesn’t compute that all the most talented people are white nonHispanic heterosexual able-bodied gentile males.) Second, it empowers those other communities and gives them a sense that they are at the table along with everyone else. It makes the country stronger.

Equal Rights: To what must be the horror of many Republicans — especially those from Texas who bowed their heads in prayerful protest when Congressman Jim Kolbe spoke to the Republican Convention on the subject of trade policy — there were 212 openly gay and lesbian delegates at the Democratic Convention. (Well, 211, and one transgender, a World War II veteran, now a woman, named Jane Fee.) Several of us spoke. The administration has appointed more than 150 open gays and lesbians to significant posts. In the last Bush administration there were . . . zero. Bush sides with the 39 states in which it remains legal to fire someone simply for being gay. And he favors retaining the Texas sodomy statute under which — right now — two adults are being prosecuted for having intimate relations in the privacy of their own bedroom.

Hate Crimes: After James Byrd, Jr. was dragged to death and decapitated behind that Texas pickup truck, George W. agreed to sign a hate crimes bill — but only if the phrase “sexual orientation” were deleted. The Byrd family, perhaps thinking that their loss was no worse than that of Matthew Shepard’s family, said no: those words should stay in. So Bush had the bill killed in the Texas Senate.

Education: Democrats agree we need standards and competition and charter schools. Where we disagree with Republicans is vouchers. The first thing vouchers would do is take a ton of taxpayer money and give it to the millions of parents whose kids are already enrolled in private schools. Democrats would rather use that money, and more, to renovate and revitalize the public schools and shrink classroom size. Take a look at the aggressive changes and incentives Democratic California Governor Gray Davis pushed through immediately upon being elected.

Health Care: Though both parties believe everyone should have decent health care, Democrats seem more anxious than Republicans to find ways, and commit resources, to make it happen.

AIDS: Some find it shocking that Dick Cheney voted against funding AIDS research back in the Eighties, and that George W. has not, so far as we know, ever publicly uttered the word while governor of Texas. Naturally, neither man is “for” AIDS. But the level of concern with regard to this worldwide plague that may well kill a billion people by the time it runs its course seems significantly higher within the Democratic Party than the Republican Party.

Social Security: Both parties promise to keep it strong. But Republicans would siphon off $100 billion or so each year for private accounts — which weakens our ability to pay benefits — while Democrats would, instead, keep that money in the system and create additional incentives for people to save extra money to supplement Social Security.

Comprehensive Nuclear Test Ban Treaty: Democrats wanted to join most of the rest of the world and ratify it. Republicans killed it.

U.N. Dues: Democrats seem inclined to pay them. Jesse Helms says no.

#

Many of my best friends are Republicans — but they are not Jesse Helms Republicans. They are not Trent Lott or Dick Armey Republicans. Or Tom DeLay or Bob Barr Republicans.

As a result, many of them are voting Democrat this year.

When I wrote the column that Kevin, Joe, and others found too shrill, I was exasperated. The Bush speech — indeed, the entire Philadelphia convention — seemed designed to fool people. Ah, the diversity. Ah, the compassion.

I switched off the TV and — exasperated! — wrote my column. I assumed that tone would come through (and tried to signal it by saying, “Yes, I’m not being entirely fair.”).

But I do agree that, in general, a moderate, even-handed approach works best.

If I stray from this, it is because I believe this is the most important election of our lives. The specter of Trent Lott and Jesse Helms and Dick Armey, et al, “un-vetoed” scares me. The prospect of a Supreme Court in the mold of Clarence Thomas and Antonin Scalia for the next 25 years — the two Justices George W. told “Meet the Press” he most admired — depresses me.

As one pundit put it (sorry I forget which), the other side’s slogan seems to be: “Out with the new, in with the old!” Were the Bush years that good?

I believe Al Gore will win. He is a much better man than most people realize. (The Convention seems to have opened people’s eyes to this possibility.) And with things going so well, why on Earth would anyone want to change course?

Thanks, one and all, for your feedback.

Coming Soon: What You Taught Me about the Second Amendment

I had no idea having fun was this much work. I fully expected to be writing columns this week, but every time I turned around, I had to have more fun. Brunch fun, lunch fun, munch fun, caucus fun, hallway fun, skybox fun, even some kind of Moroccan casbah belly-dancer fun (sponsored by the Credit Union National Association, those wildmen).

Thanks for giving me the week off.

Brian Bouchard: “Good job on the balloons.”

Too tired from blowing up balloons to do any heavy lifting, but two quick ones:

A thought on the First Amendment

“The First Amendment never, never, ever was intended to set up this so-called wall of separation between church and state, to have this separation between government and God. It just wasn’t intended.” — Pat Robertson, May 5, 2000

So maybe we can have an official state religion after all.

A thought on the Second Amendment

When the Constitution says . . . “A well-regulated militia, being necessary to the security of a free state, the right of the people to keep and bear Arms, shall not be infringed.” . . . what does the N.R.A. believe “well-regulated” means?

The tip sheet for Convention speakers warns, “Don’t expect or wait for the audience to quiet down for your speech. One of your major challenges is playing to a live audience that might not be paying attention to you.”

When YOU pay no attention to me, I don’t know it, which is why I love writing this column (plus, I don’t have to shave).

Anyway, this is what I said:

I’m a writer, not a politician. But I believe this election is hugely important. And that even my Republican friends should be with us.

Because the entire political landscape has shifted to the right. We Democrats have moved to the center and the other party has nearly fallen off the edge. A moderate Republican couldn’t even get confirmed as ambassador to Mexico, let alone considered as a viable presidential candidate.

The irony is that on the issue the Republicans like to claim — fiscal prudence — they’ve totally lost it. They push and push and push for a massive tax cut that sensible Republicans like Alan Greenspan think would be terrible economic policy — a booming economy is exactly when not to add massive stimulus — and that even John McCain agrees is weighted far too heavily in favor of the rich.

It’s bad economics and it’s not fair.

We need moderate tax cuts. Fair tax cuts. And sound policy.

With Al Gore’s strong urging, this administration chose fiscal prudence right from the start, and it has paid off big time. A soaring stock market . . . low inflation . . . a budget surplus . . . 22 million new jobs.

And do you know how many Republicans voted for that first Clinton/Gore budget? Take a guess because this is important. Not one.

And who cast the tie-breaking vote? Al Gore.

And then there’s the Clinton/Gore push for freer trade. Remember the “giant sucking sound” that some foretold? How unemployment would soar?

Well, it was good policy, and it has served us well — along with people in other countries, whom we should also want to see prosper.

What Democrats get — even as the leaders of the other party bash our tiny foreign aid budget — is that in an increasingly interdependent world, if “they” do better, we do better, too.

It is a message of inclusion, fairness, opportunity and community.

That’s why I was so proud of the Democrats for pushing to hike the minimum wage. If “they” do better, we do better, too.

I want to see Al Gore and Joe Lieberman in the White House because we will all do better.

And for one more reason.

Money’s great, but what good is net worth without self worth? Appreciation of your stock portfolio without, also, a sense that you are appreciated as a person?

The Democratic leadership celebrates diversity. Not for show — for real.

They have made my life and the lives of millions of other gay and lesbian Americans immeasurably better. No amount of money can buy that.

So I spoke to the Convention, and was so relieved when it was over I took the rest of the day off to blow up more balloons. Back to a regular schedule next week. Sorry.

The Convention starts today. Several of you wrote good comments last week, suggesting I went overboard last week criticizing the Bush acceptance speech. You deserve a good answer, and I almost finished writing it over the weekend, but I don’t want to post it until I’ve had a chance to get it right. It’s been very hectic around here blowing up balloons and lettering signs.

And now they want me to start shredding the colored paper to make confetti.

Soon.

Dave Muller: “Stephen King sees your ‘clickle” and raises you a “cluck” (i.e. a dollar a chapter for his new on-line novel). Any thoughts?”

☞ Two. First, he should have made the first chapter available free to anyone who wanted it. Five million people would have downloaded it . . . and been hooked if it’s any good. Second, he should have made it 50 cents, not $1, a chapter. (I’m assuming it’s about 20 chapters – why should an online book cost $20?)

Try http://trac.org/ for phone rates, but also for a whole list of directory assistance services, like anywho.com.

Mike da Mailman: “One of your links is to a site that offers free long distance phone calls if you watch enough ads. Well, I discovered dialpad.com and it has free long distance, no ads, no charges, no money, no kidding. I have been talking to Virginia (the state) from California for free. I love it. Have to have speakers and a microphone (I use earphones with a swing down mic) and sign up and get a password and then just call. It is as clear as most cell phone conversations or a two way radio, but, what the heck, it’s free.”

And speaking of free, 1-800-555-TELL is now ready for anyone and everyone to call — and it’s free! Just call and say the keyword you want — “Stock Quotes,” “Weather,” “News,” “Sports,” “Traffic,” “Taxi” if you need to call a cab or “Airline” if you want to call Southwest but can’t recall the number. You no longer need to use the PIN that was assigned during the trial. And for a while anyway, if you find yourself at a payphone without a quarter, you can say “Phone Booth” and use Tell Me to make a free two-minute local or long distance call. Click here for more – or just try it . . . 800-555-TELL.

Or customize your favorite stock quotes and then call800-555-TELL and say “Tell me my favorites.”

Not bad for free.

Listen: While all this election stuff is going on, I’m going to have to rely on you guys even more than usual to say something interesting.

So here are two examples, the second of which will doubtless make the slave-owners in the crowd really cross, so I apologize in advance.

Robert Doucette: “If anyone would be interested in a little evidence of the value of diversification and asset allocation, let me present my own example. When my company’s stock reached an all time high this spring, I was envious of those who had 80-100% of their portfolio invested in it. Over the years, I had sold some of the stock and diversified into slower growing investments – occasionally wondering if I was doing the right thing. Over the past few months the stock has dropped from 75 to 35. My portfolio, on the other hand, has dropped only 15% — painful but still tolerable.”

Jim Batterson: “The main reason I’m voting democratic this year is to remove Jesse Helmsfrom his committee chairmanship. I think he has sabotaged American foreign policy for long enough.

“There are many issues in American foreign policy in which we have not only failed to show leadership but clearly surrendered the moral high ground. How can we have the nerve to shake our finger at Castro when:

“1. No one, not president or candidate nor anyone in Congress, is outspoken about the practice of SLAVERY in Sudan and Mauritania. Is this a controversial issue? Should we be embarrassed for not pushing this?

“2. We persuaded the rest of the world to sign on to an international treaty to ban LAND MINES and then drag our feet on signing on ourselves. These indiscriminate mechanisms of maiming and death continue to kill children and civilians for decades after their useful life is spent. They should go the way of poison gas.

“3. Why has the United States refused to sign on to an international treaty banning the use of children in combat? Is it because the treaty defines children as under 18, whereas the United States allows enlistment at age 17? Since most of the services require a high school diploma and most people are 18 or nearly so by the time they graduate from high school, it seems a small price to pay in exchange for supporting a clearly defined global good.

“4. After persuading the United Nations to water down the power of an international criminal court, overcoming any objection that anyone could have to it, we still have not committed to endorsing it. Could there be any more obvious need in the world than for an international criminal court? Do we really think that unilateral military intervention is a long-term solution to these problems? Please.

“5. Let us get in the habit of paying our dues to the United Nations in a timely manner. This is just embarrassing.

“6. How many embassies are now the home to ‘acting’ ambassadors while Jesse Helms holds up appointments of real ambassadors for petty or political reasons.

“7. And while we are at it, how large is the backlog of cases in our criminal court system because the Judicial committee refuses to approve the appointment of minority judges? Will George W. and his new party of diversity be appointing judges that reflect the full diversity of our society? Is that more important that the fact that he has a nephew that they call the little brown one?

“Give me a break.

“I care about all of these issues. I want the Democrats to talk about them. All of them. Go out on a limb. Come out against slavery.”

All right. I can live with that. And somehow Robert forgot to include the Comprehensive Test Ban Treaty, that Trent and Jesse took such relish in deep-sixing. To me, that was perhaps the most egregious of all.

I know some of this stuff is controversial (not slavery, obviously) — and that Dick Cheney doubtless thought he was doing something good and anti-communist when he voted against urging South Africa to release Mandela – but on balance, I sure think Robert’s onto something here.

Anonymous: “Your idea of ‘Andyday’ sounds like something my 6 year old son would fantasize about. On that notion alone, I will never buy one of your books.”

Geez! You miss writing one rotten column, and people start saying they’ll never read any of your other rotten stuff!

(Sorry, though.)

Tom Sasek: “Will middle-America vote for a Jewish vice-presidential candidate?”

Well, I feel certain they’d vote for a Jewish Fed chairman, and that’s a far more important job.

Senator Lieberman is a very smart, very decent man. And I must admit that when it comes to economics, I am a so-called “new Democrat,” as are he and the Vice President.

Many of you know that the Democratic Leadership Council (DLC) is the group that Governor Clinton chaired before becoming President — and that Joe Lieberman currently chairs. When you hear about “practical idealism” or the “third way” politics of Bill Clinton and Al Gore and Tony Blair and the “New Democrats,” this is where it comes from. I tell many of my Republican friends that, now that the Republican leadership has slid off the right edge of the earth, they — my friends — are really DLC Democrats without realizing it.

This is not to knock the more economically liberal wing of the Democratic party. But I think Clinton/Gore have resoundingly shown that you can be practical idealists, favoring investor-friendly, free-market solutions — yet fight for everything from a rise in the minimum wage to the Family and Medical Leave Act to sensible policies on guns and tobacco, to the environment and equal rights.

Barron’s (or was it the Journal?) recently had an interesting little piece about how we shareholders would fare under Bush or Gore. Not that this is any way to pick a president – or that the past can be counted on to repeat. But the market, this article showed, generally does better when the incumbent party’s presidential candidate is reelected than when it is not. I think that could be particularly true if Bush won and felt he had to make good on his much-too-large tax cut instead of “staying the course” we are now on.

I think Senator Lieberman is a terrific choice.